Morrisons gets higher GBP6.7bn offer from Fortress but more bids possible

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Wm Morrison Supermarkets PLC (LSE:MRW) (LSE:MRW) has received a higher takeover offer from US private equity giant Fortress, whose recommended bid now values the grocery chain at GBP6.7bn.


In a statement, the grocer and its ‘bidco’ said they had agreed on a new cash bid of 272p per share or around 7% more than the previously recommended deal of 254p per share including a dividend.


This increased offer, which comprises a cash consideration of 270p and a special dividend of 2p, follows criticism of the deal from various parties, including the grocer’s largest investor.


Silchester Asset Management, which owns a 15.1% stake in the Bradford-based chain, said on Tuesday night it was “not inclined to support” the 252p-per-share offer from the Fortress-led consortium.


Silchester said that there was “little in the recommended offer that could not be achieved by Morrison as a listed company”, and the board should “allow more time to respond to other parties who might offer better value to Morrison’s public shareholders”.


Legal & General has also expressed doubts over the deal, comments that have chimed with a general mood swing against private equity deals and takeovers in general if they lead to cost-cutting, lack of investment and asset stripping.


Rumours have also been swirling that original bidder Clayton, Dubilier & Rice, another US private equity firm, is putting together the resources for a renewed attempt to buy the UK grocer.


Talk that online giant Amazon might get involved also has not gone away.


In the statement today Morrisons’ directors repeated that they considered a deal with Fortress was “in the best interests of Morrisons shareholders as a whole, and accordingly unanimously recommend that shareholders vote in favour”.


Fortress recently added GIC, the Singapore sovereign wealth fund, to the consortium it had put together to bid for Morrisons that already includes the Canada Pension Plan 9CPP) and US billionaire Charles Koch’s real estate business.


Fortress said the deal will be funded through a combination of equity and debt capital provided by the four groups, though once the deal becomes effective it will own 65%, KREI (Koch) 22% and Cambourne (GIC) 13%.


Fortress added it might syndicate out its investment further.


Shares in Morrisons rose by 2.4% to 278.4p, or around 2% higher than the new offer indicating another suitor is being tipped to enter or re-enter the battle.

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